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Posted by Sid Laymes on September 14, 2020
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Fintech in quick: CFPB problems No-Action Letter Templates for Affordable Small Dollar Lending and Mortgage Loss Mitigation

A week ago, the buyer Financial Protection Bureau (the “CFPB”) released two “no action” letter templates that address the affordable dollar that is small and mortgage payment relief for customers whenever numerous might need it most. Both templates had been given within the CFPB’s Policy on No-Action Letters (the “Policy”), that was revised in 2019. Depository organizations looking for CFPB approval for little buck installment loans and home loan servicers looking for CFPB approval to be used of certain loss mitigation solutions may use these templates since the foundation due to their no-action letter applications. The Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, the National Credit Union Administration, and the Office of the Comptroller of the Currency issued the “Interagency Lending Principles for Offering Responsible Small-Dollar Loans” that outline important risk management considerations for regulated financial institutions to consider when making small dollar loans to individuals and small businesses in a related May action.

Small Dollar Lending

The template that is small-dollar released in reaction to a credit card applicatoin from the Bank Policy Institute (“BPI”) and offers a path for BPI bank users as well as other deposit taking organizations wanting to offer small-dollar credit items. A job candidate can utilize this template to request a CFPB no-action letter assurance that is providing its small-dollar credit items will likely not trigger a CFPB supervisory or enforcement action.

The template requires a job candidate to give various kinds of information, like the following: (1) the things placed in area an for the Policy, including a description regarding the applicant’s proposed credit item and a reason associated with product’s consumer that is potential and dangers; (2) particular certifications, including that the applicant is, or perhaps is connected to, an insured depository institution or insured credit union with total assets in excess of ten dollars billion, that the small-dollar credit item is structured as either a set term, amortizing installment loan or an open-end personal credit line, and therefore the mortgage quantity doesn’t surpass $2,500; and (3) information regarding item features and lending methods, like the anticipated APR range, extra charges, a description regarding the payment structure and a description of this lender’s underwriting requirements. Continue Reading

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